The Entrepreneurial Engine of Institutional Change [ACERE 2017 Conference Paper

Abstract

In this paper, I take a closer look at how very talented people read the institutional framework – and what choices they make inside of this framework. My aim is to develop a theory of institutional change based on the work of North, and especially his 1993 paper in which he called for the development of a theory of institutional change and provided a set of definitions and a framework to start with. His initiative has since been joined by the new institutional economics and parts of his framework have been developed, but there is one side that has not been much researched: how the entrepreneurs impact institutions. The question seems nonetheless a crucial one to me, since, to North, the institutional change is an endogenous process in which the entrepreneur is the agent of change. To my knowledge, only two publications dived into this question: Lopez and Leighton (2012) and Tarko (2015) that both focus on political entrepreneurs and the impact of ideas and intellectual innovations on institutions. Hence this is my attempt of a theory of endogenous institutional change centered on the entrepreneur’s choice – and how the interactions of institutions and entrepreneurs affect the development of the economy. The framework, theory and model that I develop here can be applied on any country with any level of development. It is to be used to assess the quality of the institutions and how they encourage entrepreneurs towards innovation, which ultimately leads to economic development.